Growth of Middle Ireland defies trend across the West

Growth of Middle Ireland defies trend across the West

SATURDAY INSIGHT

Sore points: Mortgage matters worry the middle class here, but they are faring better than their counterparts in most other nationsTaoiseach Leo Varadkar has wooed the early risers

The good news if you’re wondering how you are going to pay for childcare or get on the housing ladder is that things are worse, and in many cases a lot worse, for middle-income earners across the world.

At least those are the findings of a report by the Organisation for Economic Cooperation and Development, an institution that tracks changes in the world’s rich industrial economies.

According to the report which was issued this week, Ireland’s middle class is not as “squeezed” as most others in the 36 countries it tracks.

Here, the middle class has at least managed to grow in size in the years between the mid-1980s to the mid-2010s.

In most of the developed world the middle class is shrinking as a share of population as people sink back into relative poverty.

Our growth numbers may look pretty academic to a family that cannot get onto the housing ladder, but median incomes were up 0.7pc and the middle class expanded by 3.9pc.

The last of those was the best performance of any country in the study.

Pity for example the poor Greeks who saw incomes decline 5.7pc, while the OECD average grew just 0.3pc, or Spain where the proportion of people defined as middle class fell by 3.7pc, almost all of whom fell into the lower income bracket.

The middle classes are of course beloved of pundits and politicians, Taoiseach Leo Varadkar among them as he famously based his 2017 Fine Gael leadership run on an appeal to the “people who get up early in the morning”.

To be fair to Leo, it would be foolish for any politician to ignore a group that accounts for 60.4pc of the population and pays the bulk of taxes.

And there is political capital in identifying them as those who “aspire to something better for themselves and their families”.

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These people, the Taoiseach said, are those who “feel they pay for everything, but qualify for nothing”.

Yes, they do pay 62.3pc of all taxes according to the OECD, but the report also shows that those who give also receive the biggest chunk of state transfers at 54.1pc.

In fact it is the State’s relatively progressive taxation and transfer system that props up the broad middle-class base here, transforming Ireland from one of the least equal countries into one of the most as the rich pay a higher chunk of income tax than in most other countries, while low-earners get most of the tax credits.

Many of those who are classified as “middle class” here are on incomes that attract transfers.

The OECD study places those with incomes of between three-quarters of the median and double into the middle.

Many people here would perhaps struggle to reconcile the bottom end of the range as middle class.

That range, in 2016, is from $18,704 (€16,554) to $49,878 (€44,146) a year, and for the purposes of comparing across countries and time it is measured in 2010 dollars at purchasing power parity, a measure that eliminates exchange rate variables in the cost of living.

To be sure, you can dispute the numbers and sniff that a salary like that wouldn’t even get you in the door if you wanted to aspire to the middle class dream of owning a house, but they tally across countries.

Approximately 54pc of people here self-identify as middle class, roughly matching the data.

Why does the middle class matter to both economists and to politicians like the Taoiseach?

Well, in the words of the OECD they are the “bedrock” of economic growth and societies which have large middle classes have lower crime rates, higher levels of trust and life satisfaction as well as greater political stability and good governance. You only have to look across the Irish Sea to Brexit land to see the costs of political and economic polarisation to confirm those sentiments.

Keep in mind that the aspirations of the middle classes are generally shared by rich and poor too.

Who would not like access to secure housing at a reasonable price, good schooling for their children and a chance for them to move up as well as decent, affordable healthcare?

The chances you will fall into poverty next year if you are in the “low income” segment here are 7.3pc, according to the OECD study. If you are middle class, the odds are considerably lower at 1.9pc.

As for the rich, well they have their own problems.

The ‘Financial Times’ suffered widespread ridicule when it highlighted the lives of Sophie and Jules, from southeast England’s London commuter belt.

They had an income comfortably into six figures and lived in a house with a swimming pool and outbuildings.

“Even on what looks like a very large salary, it is difficult to put three children through private school and have them board,” Sophie told the newspaper.